Promoting Transparent Pricing in the Microfinance Industry. Consumer Protection, Consumer Education, & Financial Literacy August 2010

Transcription

1 Promoting Transparent Pricing in the Microfinance Industry Consumer Protection, Consumer Education, & Financial Literacy August 2010

2 Agenda Financial Inclusion, Consumer Protection & Consumer Education National Financial Education Strategy 2

3 Financial Inclusion & Consumer Education Financial Inclusion seeks to: Increase financial outreach to under-served and unserved populations Improve access at a reasonable cost to these populations to a range of financial services and products Consumer Protection Efforts and Financial Literacy Initiatives help bring new customers to the market (Source: Indian School of Microfinance for Women) 3

4 Consumer Protection? Consumer protection involves the implementation of measures that: prevent irregularities or transactions which have negative impact on consumers; empower consumers to exercise informed choices and select value-for-money goods and services; provide fair access to basic goods and services; and open avenues to address consumer interests and concerns Source: MICROFINANCE INDUSTRY ADVISORY on Consumer Protection in Microfinance, 11 October 2007, Philippines 4

5 Three Main Consumer Protection Goals There are three main consumer protection goals regardless of whether the consumer is a fruit vendor in Ghana or a home buyer in the U.S., says CGAP expert Kate McKee. Information given to the customer should be transparent: it should be clear what they are getting. Customers should be treated fairly and should only be sold products and services they can handle. Last but not least, financial services providers should put easy-to-use systems in place for resolving errors or disputes. 5

6 Microfinance Client Protection Principles 1. Avoidance of over-indebtedness 2. Transparent pricing 3. Appropriate collections practices 4. Ethical staff behavior 5. Mechanisms for redress of grievances 6. Privacy of client data 6

7 Consumer/Financial Education Financial education addresses weak financial literacy by empowering the poor to make wise financial decisions. May teach people how to save more, spend less, borrow prudently, and manage their debt with discipline. (MF Opps) Financial literacy has been defined as the ability to process financial information and make informed decisions about personal finances. (IFMR, India, 2008) Needed to balance information between consumers and providers of financial services 7

8 National Financial Education Strategy Comprehension Behavior Change Awareness 8

9 National Financial Education Strategy Target Groups: Consumers Microfinance Service Providers Donors, Investors & Funders MF Networks and Support Organizations Governments, Politicians Content: General awareness of financial services Consumer rights & Code of Conduct for Providers Technical knowledge of all stakeholders 9

10 Global Financial Education Initiative Partners: Microfinance Opportunities, Citi Foundation, Freedom From Hunger Structure: Training program focused on: Budgeting, Debt Management, Savings, Bank Services, & Financial Negotiations, among others Objective: global program targeted at those just above and below the poverty line in developing countries Outreach: 300+ trainers in 37 countries; 125,000 client recipients; 6.7 million people have been exposed through radio, print, dance, drama, etc. 10

11 Peru s Financial Education Program for Secondary Students Partners: Superintendency of Banking, Insurance Companies and Private Pension Funds of Peru (SBS) and the Ministry of Education Structure: a national training of trainers program for secondary school teachers Objective: provide secondary school students with basic financial education tools Outreach: Currently reaching 200,000+ students via teachers and a long-term goal of 100% coverage of all Peruvian students; 11

12 Partner to Develop or Distribute The SBS (Central Bank of Peru) produces pamphlets about transparency in financial services sector and rights of consumers of credit Educational Materials 12

13 Bosnia s Center for Financial and Credit Counseling Partners: Leading MFIs, IFC, EFSE, DFID Structure: Center that provides national credit information helpline, monthly mobile financial education program that travels to cities, Mediation services for over-indebted clients, One-on-one financial and credit counseling Objective: to address issues of over-indebtedness, provide financial education and counseling, and address the problems of lack of transparency in the BiH financial sector. 13

14 Financial Education Partnership for Kenya Partners: FSD Kenya, Ministries of Finance, Cooperatives, Education, Youth & Sports, etc. Structure: Active partnership network Objective: the partnership aims to build a strategy that finds effective ways to improve the nation's knowledge and understanding of personal finances. Outreach: national outreach, on-going 14

15 Insurance Consumer Education-Kenya (ICE-K) Partners: Microfinance Opportunities & Association of Kenya Insurers (AKI) Structure: Training of trainers ; radio campaign; technical support to organizations Objective: to expand the Kenyan microinsurance market by improving the risk management capacities of low-income people through insurance education Outreach: Project currently in-process so outreach unknown 15

16 Changing the Perception of Microinsurance in Brazil Partner Institutions: CNSeg, the Brazilian Insurance Confederation Structure: a radio soap opera, a short film, street theatre, and printed graphic material. Objective: focus on raising awareness and educating low-income potential insurance consumers, be they individuals or commercial enterprises, in the formal or informal economy. Outreach: goal is a significant portion of the nearly 30 million low income people in Brazil 16

17 Uganda s Consumer Education Programme Partners: FSDU, AMFIU, CDFU, Ministry of Finance Structure: mass market communication of broad messages across the country; posters, leaflets and flyers, radio call-ins, radio spots, and flipcharts; newspaper inserts, called Money World magazine; Training of Trainers for MFIs; theatre performances Objective: disseminate messages about knowledge of consumer rights and responsibilities, and types of financial institution and product 17

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22 Partners: Central Banks, MF Networks, MFIs & Banks, Training Institutions Structure: Provide trainings, interest rate disclosure mechanisms, legislation recommendations for interest rate disclosure & consumer protection Objective: to promote transparency in prices & educate microfinance industry on financial capability Outreach: Global, with country-by-country methodology 22

23 A long-overlooked need We have made major investments in improving the quality and clarity of information on microfinance institutions. But we have not yet invested as much as we should in making sure costs of financial services for poor clients are clear and fair. MFTransparency s initiative is a bold one that promises to fill an important gap. Elizabeth Littlefield, ex-director and CEO, CGAP 23

24 How to achieve Responsible Finance? MFT s Business Model 1. Consulting on Legislation & Regulation: MFT provides recommendations to central banks and regulatory authorities around consumer protection and pricing transparency 2. Data Collection & Dissemination: MFT collects product prices and information to display on its website to facilitate a more transparent market. 3. Technical Assistance & Training to Service Providers: MFT provides technical training to MFIs, rating agencies, industry initiatives, and other organizations to improve practices and create standardized practices in the industry 4. Consumer awareness, education and financial capability : Provide training materials and resources to improve client consumer literacy 24

25 Transparency for a Healthy Microfinance Industry Policy / Regulation Analytical Publications Regulators 75 Countries MFI Industry 5,000 MFIs Conferences and Educational Materials Transparency Public and Press Consumers 100 million Pricing Data Website Education Effective policy requires building a strong foundation at the Bottom of the Pyramid -- Pricing Transparency and education of all stakeholders creates an enabling environment for a healthy microfinance industry

26 MFT Works with all Industry Stakeholders MFIs MFT Networks, Associations, Industry Initiatives, Rating Agencies Regulators, Supervisory Bodies, Consumer Protection Agencies Donors & Investors 26

27 Transparent Pricing in Malawi Activity 1 Data Collection & Dissemination Activity 2 Develop & Disseminate Educational Materials Activity 3 Activity 4 Activity 5 Develop Analytic Reports, Train Central Bank/Regulators Provide Technical Assistance & Training to MFIs on Product Pricing & Costing Maintain Pricing Data for 1 Year, Produce Evaluative Report 27

28 Our Sponsors Ford Foundation Elena Nelson Anna Maria Zegarra Nancy Goyburo Maria Sara Jijon Bill Maddocks Kim Wilson NarasimhanSrinivasan Point Loma Nazarene University 28

29 Promoting Transparent Pricing in the Microfinance Industry